Epiphany Trading's Blog

The Modern Stock Operator

epiphanytrading — Tue, 01 Dec 2009 21:32:07 +0000

Erik R. Kolodny

TUES. DEC. 1- Busy or Slow?

epiphanytrading — Tue, 01 Dec 2009 13:48:00 +0000

There are two ways that the rest of the year could play out for day traders. I am not good at prognosticating such things so I cannot begin to hazard a guess as to which way this will play, but I am very certain it could only go in one of the two conduits that I will describe. Both are dependent upon the Abu Dhabi contagion and whether the damage is contained. The first way is where my bet was definitively going to lie before the events of last week. In what has been an incredible year of action, the stock market has had one of its most dramatic falls followed by one of its most dramatic rallies literally in the history of trading. People are tired and so is the market. Before last Friday, the VIX was around 20. Mutual funds have booked profits for the year in many cases. There is also a lot of indecision as to what to do next along with what 2010 holds. Thus, there is at least a 70% shot still that the market settles into a range and does absolutely nothing. We end up having days like yesterday where there is spotty action and then a long period of placidity. Last Wednesday, just before Thanksgiving, the NASDAQ traded in its narrowest full-day range in almost three years. Should that pattern hold, there will be limited action in the morning and then a ‘waiting for Godot’ period all day for…nothing. It’d actually get more acute the later in the month as people give up. The action would be centered upon the microcaps only and trading would be as illiquid as it was on Friday. The other way it can play out is in a frenzy, but on low volume. The dollar and gold are perilous levels with markets in Asia performing very badly (the Nikkei has now lost more than half of the rebound from its 2009 low, i.e. it’s trading at the equivalent of Dow 8300 or so based on the domestic market run-up). Nobody knows exactly how bad the Dubai crisis is. Finally, all we hear is how typically December is a quiet month in terms of overall performance. Again, I am not going to predict how this will play out. But I don’t think it’ll be halfway; it’s either going to be very busy or very slow with no in between. Have the mindset to be ready for anything on any given day; it’s important not to be disappointed or frustrated by slow action…nor shocked by rapid action.

Markets overnight continued to recover throughout the world with Asia up 2% across the board and the European bourses up over 1%. Oil is up over 1% as well, gold is making a push towards $1,200, and the dollar has broken back below the critical 1.50 euro level. This cocktail combined with money flowing into mutual funds at the start of the month and a bit of a decline of the worry over the Abu Dhabi situation is leading to a nice rally in the futures. Off-hand, there is no real reason to think the markets will give back any of the ground. Look for a relatively strong session to persist barring an exaggerated move in the dollar. Focus only on stocks in the news if the markets remain as quiet and illiquid as they have been as momentum trading will get you in trouble.

Watch list:
12012009Eriklist.zip

Reiterating-Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there -If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern

GES- good earnings and positive guidance as well

ALTR- positive earnings guidance

GS – closed near a high in a strong financials group

AMZN- closed at an all-time high

TRIT- closed at a high

REV- closed at a high; near a breakout on a longer-term chart

ISPH- closed near a high after Leerink Swann identified the stock as one to watch for an unexpected positive surprise in 2010

CSGS- closed near a high after inking a pact with DISH

CYD- closed near a high

WSM, ETN, JAH, WHR, NWL- featured on “Mad Money” last night

MITI- Bayer exercised option to develop antibody with MITI

SPLS- good earnings

AIG- cut debt to government by $25 billion

Bad-The following stocks have bad news and/or a weak technical pattern

HGSI- 12 million share offering

CUTR- postponed release of its Trusculpt indefinitely

SD- acquiring oil and gas properties from FTO; issuing 22 million shares as well

AIG- closed near a low after Bernstein cut its price target to 12

OVTI- poor earnings

NLST- Inphi filed patent lawsuit

AGO- share offering

PLX- signed deal with PFE, but there is disappointment that the company was not bought out

Earnings:

TUES DEC 1 BEFORE

BECN NPD SPLS

TUES DEC 1 AFTER

SNDA

Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

MON. NOV. 30- Trouble With Dubai World

epiphanytrading — Mon, 30 Nov 2009 13:22:00 +0000

So what exactly happened on Thanksgiving Eve? To understand, I for one needed a primer. Dubai World is Dubai’s benchmark for its investments throughout the world. It is a government-owned entity at the epicenter as Dubai’s conduit to diversify its economy in various investments. Dubai has the highest population of the seven United Arab Emirates. Dubai World commenced in 2006 with the ruler of Dubai holding a majority stake in the company. Its assets include a marine terminal operator, investments in drydock firms, urban development interests, and a host of investments in financial services. Its best known holding is Nakheel- the property developer in charge of projects such as the artificial Palm Islands. In January 2009, the first sign of trouble emerged when Nakheel said that work would be halted for the Nakheel Tower project; the Nakheel Tower was supposed to be a 200-story skyscraper. As the worldwide recession has failed to loosen dramatically, the real estate market in Dubai fell about 50%. On Wednesday night, the company (Dubai World) noted that it “intends to ask all providers of financing to Dubai World and Nakheel to standstill and extend maturities until at least May 30, 2010” on its debt. Dubai World will immediately restructure its $59 billion debt. This has led to a dramatic financial impact throughout the rest of the world. The major focus is on a host of European banks which underwrote ore loans than anyone else to Dubai World with a focus on Royal Bank of Scotland and HSBC. Furthermore, there is a wide variety of off-balance sheet financing and instruments based on the project which raises questions marks as to exactly how high the true wealth destruction is. The worry now centers upon the ramifications for the balance of the world. If European banks sustain a major blow here, how will that affect the economic recovery in Europe? In Asia, nations such as Vietnam were forced to adjust the peg rate on its currency. As the dollar has become the relative safe-haven, the carry trade has reversed a bit with gold down along with oil and other relatively risky assets. So, what happens here is anybody’s guess based on whether Abu Dhabi will bail out the entirety of Dubai World and exactly how much the true amount of liabilities are. But the fallout from this will be with us for awhile as everything settles itself out.

Watch list:

11302009Eriklist.zip

SEED- closed near a high

CSIQ- among other solars which recouped major early morning losses and closed near a high

KNDI- closed near a high

QLTI- closed near a high

X- closed near a high; Goldman Sachs upgraded steel sector as well this morning

APWR- closed near a high

TRIT- closed near a high

MON- featured positively in “Barron’s” over the weekend

Bad-The following stocks have bad news and/or a weak technical patter

LVS- Sands China fell sharply in its debut

AIG- trading down notably in the pre-hours; there is no apparent news on the wires except for rumors of ties to Abu Dhabi and the sale of its aviation unit

Earnings:

MON NOV 30 BEFORE

None

MON NOV 30 AFTER

OVTI

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

FRI. NOV. 27- Kids At Play

epiphanytrading — Fri, 27 Nov 2009 12:24:00 +0000

On this Kid’s Day at the NYSE in which everyone is encouraged to bring their kids to work there, let’s reflect not on what we’re thankful for (that was yesterday!), but rather why the market is open today. The market is typically open for half days on the day before Independence Day, the day after Thanksgiving, and Christmas Eve. There have been selected days in which the market has been closed full-days as well. Namely, the market closed for several months during World War I, a stretch of days on and off between 1928 and 1930 in which member firms were allowed to catch up on work from the heavy volume of that time, and on days in which there have been funerals of presidents. Most recently, the market was closed for four days during the horrible 2nd week of September in 2001 following the terrorist attacks on American soil. Although there is nothing in the official stock exchange guidelines, there is indeed an unwritten rule that the markets not be closed for more than three days in a row so as not to allow for an order build-up and/or exacerbate a move should there may be a major news event. Since we have to be here, it is important to note that many days after Thanksgiving have been major trading days for the markets. One of the more recent interesting post-Thanksgiving sessions occurred in November 2000 after the election results were announced on Thanksgiving night. Days after Thanksgiving are typically ripe with illiquidity, but also bring in many amateurs playing stock market thus exaggerating moves that much more. Certainly, today will arguably be extraordinarily interesting so although it will be highly illiquid, there is going to be movement all the way up until the 1PM ET close (and potentially thereafter).

Markets overnight were absolutely ravaged on news that the main investment arm of the Dubai government has declared a moratorium on its debt with the implication it could default. This has shocked the system in that it’d appear that the emerging markets of the Middle East are much weaker than thought. The Vietnamese dong has been devalued and ripples are all over the system. Hong Kong and Tokyo have each fallen over 5% in the last two days. The European bourses are down about 3% in the last couple of days (although marginally higher in the current session). Oil has fallen 5%, gold is down 2%, the dollar plunged to a 14 year low against the yen…name it, it’s moving. For today, look for extraordinarily thin and volatile trade. The newsflow is nearly nonexistent in individualized names, but ostensibly any big cap tech stock is worthy of a trade especially early on. It will be very dangerous due to the thinness of the trade, but get your timing right and pick spots and it could be quite the day.

Watch list:
11272009Eriklist.zip

JCG- closed near a high after posting good earnings

DE- closed near a high after posting earnings on Wednesday morning

WYNN- closed near a high

X- closed near a high

CLWT- closed near a high

KNDI- closed near a high

TRIT- closed near a high

BKS- closed near a high

TSTC- closed near a high

DRWI- closed near a high

QLTI- closed near a high

IFON- closed near a high

SINA- three investment firms are investing about $180 million into company according to “WSJ”

Bad-The following stocks have bad news and/or a weak technical patter

DRAM- closed near a low after posting bad earnings Tuesday afternoon

Almost everything- most stocks will open sharply lower today on the Dubai news

Earnings:

FRI NOV 27 BEFORE

FRO SFL

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

WED. NOV. 25- Trading The Headline

epiphanytrading — Wed, 25 Nov 2009 13:42:00 +0000

One Friday morning quite some time ago, there was an extensive story in the “New York Times” which centered around the rumor that Altria Group (MO) is going to make a takeover offer for UST (UST). UST is the maker of such products as Skoal so it’d seem to be a natural fit for a cigarette entity. Sure enough, UST reacted violently, opening up 13 points around 67. The stock held much of the day. Then, mid-day, MO came out and called the report that it was to buy out UST “pure speculation.” The stock immediately broke slightly, rallied, broke more, and then rallied all the way back and more. What can we learn from this? A) Headlines can sometimes be misleading or factually incorrect. B) If the headlines are correct, the stock may not do what you expect it to do so get out immediately if wrong. C)The best trade is the one most people do not do- namely, take the opposite side. In this case, when UST did a A-B-A2, if you’d have bought the stock where it first was when the story broke, you’d have been very profitable. There are two morals here: first, always, be careful. Always. This coming from the author of this piece who lost money in the situation on the first move down. Second, there are always trades to be made; if something does not act as expected, the force the other way is usually quite good.

Markets overseas were gently higher overnight with Tokyo up ½%. Markets in Europe have followed suit, up about 1/3% on average. The story of the morning has been a surge in the metals with platinum up 2% and a beating of the dollar with it down near a full yen and weaker by 1 ¼ euro…just gigantic moves. Futures are modestly higher. Look for a very slow day and a positive one at that, again, pending movement in the dollar. Trading will be very slow with activity done for the most part in the morning and only in selected microcaps.

Watch list:
11252009Eriklist.zip

JCG- great earnings

TIVO- signed deal with VM, but had lukewarm earnings

BCSI- decent earnings

NVDA- U.S. Patent office rejected all 17 claims in RMBS’s patent assertions

QADI- great earnings

AONE- closed near a high after receiving a small contract from the federal government

SQNM- closed near a high on various rumors from a takeover to positive drug buzz

PVH, FLR- featured on “Mad Money” last night

HPJ- closed near a high

TBH- traded in a crazy fashion after restructuring itself into a holding company; ratio should be .1 TSU plus .1 VIVO which equals 4.72 based on closing price yesterday yet it traded to 14

LDL- closed near a high

SIGA- closed near a high

GPRE- closed near a high after posting good earnings

TIF- great earnings

INCY- entered into collaboration and license agreement with NVS for two of its investigational hematology-oncology therapies

Bad-The following stocks have bad news and/or a weak technical patter

CWTR- bad earnings

RMBS- down on the NVDA win re patent story listed above

DRAM- terrible earnings

EMC- reduced earnings guidance slightly (although kept operating earnings guidance intact)

HAL- sees major reduction in Pemex facility for 4th quarter which will hurt 4th quarter earnings

HI- closed near a low after posting poor earnings

SAY- probed anew by India’s federal probe agency over accounting fraud

DE- poor earnings

CONN- poor earnings

Earnings:

WED NOV 25 BEFORE

DE TIF

WED NOV 25 AFTER

None

TUES. NOV. 24- A Psychosis

epiphanytrading — Tue, 24 Nov 2009 13:38:00 +0000

Not long ago, upon a brief discussion of a prospective RIMM set-up, I overheard a trader say “Oh, I am not going to do that; I cannot trade RIMM.” Well, why? Let me back up a step. I constantly maintain that I am not good at trading stocks that cannot move at least 20 cents easily. I reached this conclusion after studying 22,000 trades I’d made and noting that I tended to be impatient overall in stocks so if a particular stock is not moving, I tend to exit relatively quickly and lose time and again as the data clearly showed me. Thus, I spent countless hours coming to a conclusion as far as a subsector of a section of stocks I don’t trade. With that in mind, I never dismiss a trade off-hand without at least looking at the set-up. Yes, I will dismiss it if I don’t see the potential to make a quick profit of at least 20 cents per share, but only after at least glancing at it. To simply ignore a call is folly and poisonous mentally because it shows lack of self-confidence. Thus, whenever anybody says anything, never dismiss it out of hand because you just never know if it can be the best trade set-up there is all day long. One trade has absolutely nothing to do with another in a particular stock and every situation is different.

Markets overnight were hit fairly hard in Asia as the yen continues to strengthen. The Nikkei closed down 1% with the Hang Seng down 1.5%. In Europe, prices are hanging around unchanged across the board. Oil is down slightly, gold is up slightly, and the dollar is moderately weaker against the euro. Look for a very very quiet day pending the dollar-euro mechanism as the markets consolidate yesterday’s gains ahead of the holiday. Trade only the optimal set-ups so the day will be a tale of frustration and losing money.

Watch list:
11242009Eriklist.zip

ADI- decent earnings

NUAN- decent earnings

CTRN- decent earnings

GNV- closed near a high

SEED- closed near a high after receiving approval from the China Ministry of Agriculture to officially introduce genetically modified phytase corn to the Chinese marketplace

ABIO- announced complete response letter from the FDA for a new drug application for Gencaro

AAPL- among big cap tech stocks closing near their highs

CI- closed near a high after being upgraded at JP Morgan

WHR, NAT, AMZN- mentioned positively on “Mad Money” last night

DSW- good earnings

MDT- good earnings

HRL- decent earnings

HNZ- decent earnings

AEO- decent earnings

DLTR- decent earnings

Bad-The following stocks have bad news and/or a weak technical patter

HPQ- issued in-line earnings

AMD- notes offering

PEET- closed near a low after announcing raised offer for DDRX

CIEN- closed near a low after announcing acquisition of some assets from Nortel

DY- poor earnings

GFA- poor earnings

BKS- poor earnings

Earnings:

TUES NOV 24 BEFORE

AEO BKS DLTR

DSW EV HNZ

HRL MDT WBD

TUES NOV 24 AFTER

BCSI CWTR JCG

TIVO

MON. NOV. 23- Doing Homework

epiphanytrading — Mon, 23 Nov 2009 13:40:00 +0000

I have about 10 major pet peeves regarding trading. At the top of the list is when a trader trades in an undisciplined manner. There are many variations of that theme, but the number one reason is not knowing the news. This can easily be avoided through methods such as doing homework and/or just asking what is going on if one is not sure. It genuinely bothers me when people lose money unnecessarily. Now, I do take everything to the next level- I am guessing that I spend more time writing the blog, preparing the watch list to monitor for the trading day, and doing research than I actually do trading in any given day. I am a firm believer in the principle of sifting through the minutia to find the good stuff…but boy oh boy do I ever sift through a lot of minutia. To me, it is a necessary part of the homework I undertake to have a better chance for whatever success I hope to achieve each and every trading day. I bring this up at this time to emphasize that in this particular time of extremely light newsflow, there are certain periods during the trading year in which I for one tend to earn much of my living for the year. Furthermore, when newsflow is lighter, it is inexcusable not to know stories behind why certain stocks are moving. When it is this slow, I know I need to really truly understand what is going on in order to maximize profit potential on the limited opportunities out there. One does not need to read four daily newspapers, look at 10 websites, and do a daily scan for every stock that railed/declined at least 5% and closed on its high or low the day before (although it helps me). But it certainly does pay to do a bit of homework when the opportunities are there to have a really good trading session.

Markets overseas were very strong overnight with Hong Kong up 1 ½%. In Europe, the bourses are up 1 ¼%. The dollar is very weak against the euro (which is helping fuel the rally) with oil and gold sharply higher as well. Add to the mix many people are away and news flow is generally OK and this leads to a sharp rally in futures. There is absolutely no reason for the market to lose it gains barring a rally in the dollar. Look for the market to remain strong all day. Focus on the pockets of limited opportunities out there from the casinos to the small-cap memory stocks to the solars to the limited amount of stocks with newsflow.

Watch list:
11232009Eriklist.zip

NLST- continued its run-up in closing in the upper end of its trading range

KIRK- closed near a high after posting good earnings

GGR- closed near a high

LEAP- closed near a high on takeover rumors with PCS

POT, MOS- among the fertilizer stocks closing near their highs

CLD- closed near its high of day after debuting as an IPO

SRLS- closed near a high after posting good earnings

TSTC- closed near a high

DRAM- closed near a high

GFF- closed near a high after posting great earnings

LEA- mentioned on “Mad Money” on Friday night

JOBS- good earnings

LDK- good earnings

TECD- good earnings

CIEN- buying Nortel’s Ethernet assets; sees acquisition “significantly” adding to fiscal year 2011 results

CPB- decent earnings

Bad-The following stocks have bad news and/or a weak technical patter

HSY- the company is rumored to be bidding for Cadbury

SVN- closed near a low after debuting as an IPO

DHI- closed near a low after posting bad earnings

CEPH- in an initial phase IIb/III study, Cinquil achieved statistical significance in only one of two tests

Earnings:

MON NOV 23 BEFORE

CPB LDK TECD

TSN VAL

MON NOV 23 AFTER

ADI ATW BRCD

HPQ NUAN

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

FRI. NOV. 20- Land Of The Setting Sun?

epiphanytrading — Fri, 20 Nov 2009 13:38:00 +0000

Every day, I give a cursory glance to the overseas markets, the commodities markets, and the myriad of other markets such as bonds and oil. I post the overnight performance in this space every morning. Every so often, particularly when some divergences begin to occur notably in the markets, I study things a little more in detail and pass along some things that I find particularly interesting here. Well, yesterday morning when I awoke from my slumber around 4:30AM, I noted that the equity futures had weakened notably and the dollar was strong…made sense. Except that two numbers caught my eye. First, the 9500 handle on the Nikkei occurred yesterday (try 9400 handle today) and second, the yen continued to rally against the dollar. As it turned out, despite the global rally in equities, the Nikkei closed at a four-month low yesterday on volume averaging 50% above last week’s average volume. The nation’s biggest bank (Mitsubishi UFJ Financial) was forced to do a massive fundraising. Ostensibly, concerns about the fiscal and economic policies of the newly-elected Democratic Party despite initial optimism have weighed upon shares of Japanese stocks. As it turns out, what is good for U.S. exports in the weaker dollar is negative for major Japanese exporters such as Toyota, Canon, and Sony. However, the Japanese bank morass which has been in place for about 20 years now is particularly bad in Japan far and above most other Asian nations. Thus, the triple whammy of capital raisings by the banks, the strength of the yen, and politics are all playing a part in the decline of the Nikkei. For day traders, it certainly makes for a notable sideshow. See, the correlation has loosened ever so slightly between the dollar and other commodity markets (i.e. witness gold up yesterday despite oil being negative with the euro weak). So if things don’t turn around in Tokyo, their performance could begin weighing upon the rest of Asia (as certainly happened Thursday morning in Hong Kong and Sydney) which set the sage for declines state-side. The global markets continue to be interlocked with the occasional straggler (in this case, Japan); but that straggler could upset the apple cart quite easily particularly as we approach year-end.

Markets overnight were weak overnight with Tokyo down another 0.5% and Hong Kong down a bit more. Prices in Europe fell about 2/3% on average. Oil is down 1%, gold 0.5%, and the dollar is up another euro. Not a great picture. There are all sorts of rumors out there on this options expiration Friday from a default of the Ukraine government to a ‘fat finger’ error trade in the dollar-euro in which someone accidentally bought too many dollar contracts against the euro. This is leading to a mild negative for the futures state-side. Yesterday was a weaker day than the averages would show; volume picked up, with the S&P 500 and NASDAQ both down 1.5% against the Dow’s 0.9%. Today will be wildly choppy and illiquid in the first hour of trading in particular with all the rumor mongering and the options expiry. It should calm down thereafter pending the dollar movement against the euro and then get choppy and illiquid again in the last hour. One must pick spots and overtrading today is going to be particularly fatal so cut down on size and increase selectivity. Focus upon the stocks in the news specifically.

Watch list:
11202009Eriklist.zip

BONT- closed near a high after posting great earnings

FTNT- closed near a high on its 2nd day of trading

TTIL- closed near a high after posting great earnings

TSL, STP- closed in the top band of their range after posting good earnings

NLST- snapped back in finishing near day’s high and week’s closing high

VRGY- decent earnings

RHB- featured positively on “Mad Money” last night

HIBB- decent earnings

DBRN- decent earnings

ARCL- priced 6.25 million share IPO at 16.50 within 15-17 range

SVN- priced 10.1 million share IPO at 11 at high end of 9-11 range

SJM- decent earnings

DNDN- received complete response letter from FDA with decision on Provenge expected in May 2010

Bad-The following stocks have bad news and/or a weak technical patter

GNK- among the weakest of the dry bulk shippers in closing near a low

PPD- closed slightly off of a low after receiving a complaint from the Federal Trade Commission against the company’s CEO and Chief Marketing Officer

DELL- poor earnings

GPS- poor earnings

INTU- poor earnings

ADCT- terrible earnings

FL- poor earnings

TIXC- stock closed near a low; company addressed the issue before the close yesterday in saying there was no news accounting for the stock drop

TLB- closed near a low

PALM- dropped the iPhone workaround (for now anyway)

PHM- in Sell Block on “Mad Money” last night

CLD- priced 30.6 million share IPO at 15, below 16-18 range

GTEC- priced 4.6 million share IPO at 13, below 14-16 range

ANN- beat earnings estimate, but missed revenues estimate

EMS- pricing 8 million secondary at 48.31

DHI- poor earnings

DRYS- priced secondary offering at 5.75

Earnings:

FRI NOV 20 BEFORE

ANN DHI SJM

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

THURS. NOV. 19- Style Points

epiphanytrading — Thu, 19 Nov 2009 13:44:00 +0000

On Tuesday, much less most days in recent memory, I was involved in a discussion with a group of people who just knew they should have held a certain stock longer. Just knew it. One person, however, noted something quite wise for that particular day: “Today has been choppy. Nothing has been smooth.” The simple response/add-on to the entire matter is as such: for every one stock that just keeps on going upon exit from said position, there are about 4-5 that will move 10-20 cents in your favor fast, move 5-30 cents against you, and then do whatever it was they were meant to do. When stocks are not moving dramatically, moves such as the ones we’ve been accustomed to in the immediate-run much less slightly longer-term just don’t occur as frequently or as ‘easily.’ By ‘easily,’ I mean stocks can still get their moves, but they do it in a manner that is ostensibly 22 steps ahead and 21 back. If the market is placid, why should the one trade that you do necessarily going to be the one that is gonna go smoothly? So, there are a few takeaways from this thinking. First, there is no point in being excessively frustrated in this trading environment. One can be angry and stew as much as one wants (and I for one am certainly guilty of internalizing), but the market is an entity. Sometimes it is moving rapidly; sometimes it is not. And there is nothing we can do about it. Second, it is pointless to think about what could have been except to deeply analyze how and why you can do better. I was short 10000 shares of VVUS at numerous times yesterday. But what I focused my energies on last night during my three hours or so of analysis was on how to improve my actual trades as well as to seek future trades rather than “gee, had I held 10000 shares from 9.50 to 8.60, I’d have made $9,000.” Yes, of course that thought did occur to me and yes, I did study the stock to see if I could have held it and yes, I do introspection…but the fact of the matter is- that is not how I have trained myself to trade. Finally, harking all the way back to the previous sentence, one must figure out/decide what type of trade one wants to make. If one wants to enter and exit VVUS in 30-90 seconds, that is fine. If one wants to hold it for 30-90 minutes, that is fine too. But don’t get the styles mixed up. In this environment (which will likely get only harder as we approach Thanksgiving), adaptability to placid market conditions, recognizance of intra-day trading for what it is, and the ability to keep one’s emotion in check are an absolute must these days.

Markets overnight were hit in Asia overnight with Tokyo and Hong Kong both down about 1%. Prices followed suit in Europe with the bourses down about ¾% on average. The carry trade is in reverse with the dollar notably stronger against the euro and the metals and oil lower. Futures are indicated weaker ahead of options expiration tomorrow. Today will likely be an “outside” day in that today’s range should be bigger than yesterday’s. Watch for that dollar-euro relationship. It is going to be particularly tricky to trade as things will be very choppy. One idea is to look for things that don’t look down all that much early on because in any rally, those will likely rally first and hardest. Otherwise, focus on the solars (because of the earnings), the retailers, and selected specialized situations.

Watch list:
11192009Eriklist.zip

MON- closed near a high

NTAP- beat earnings estimates and raised guidance

PVH- decent earnings

LTD- decent earnings

DCI- decent earnings

CYBX- decent earnings

CGA- announced a VAT exemption for organic fertilizer product sales in a Chinese province yesterday; stock closed near a high

EXM- closed near a high in a strong dry bulk sector

LZB- closed near a high after posting great earnings

TWLL- closed near a high

OC, WSO, DVN, BTE- mentioned positively on “Mad Money” last night

SRZ- completed the sale of 21 community portfolio for $190 million

XIDE- announced it’d be battery supplier for the Toyota Highlander in the US

SHLD- decent earnings

STP- good earnings

TSL- good earnings

WSM- decent earnings

CO- IPO pricing 3.6 million shares at 6.05

GME- good earnings

Bad-The following stocks have bad news and/or a weak technical pattern

NANO- closed near a low after announcing a shelf offering

ZOOM- continued to decline despite posting great earnings on Monday afternoon

GYMB- poor earnings

PETM-poor earnings

HOTT- poor earnings

WGOV- poor earnings

SMTC- poor earnings

MFC- fortifying its capital position by offering C$2.5 billion in capital equity

NTES- poor earnings

JACK- poor earnings

CMED- terrible earnings guidance

TEN- secondary offering of 12 million shares at 16.50

DKS- poor earnings

ROST- poor earnings

Earnings:

THURS NOV 19 BEFORE

BKE CMED DKS

HP PDCO PLCE

ROST SBH SHLD

STP TSL WSM

THURS NOV 19 AFTER

ADCT ARUN FL

GPS INTU VRGY

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner

WED. NOV. 18- Merger Activity On The Rise

epiphanytrading — Wed, 18 Nov 2009 13:38:00 +0000

“Applied Materials To Buy Semitool for $364 Million.” That in and of itself isn’t a major headline (unless you are a shareholder of SMTL!). However, that was one of the top stories yesterday and is an important part of a theme which is becoming more prevalent and likely will become predominant in the first of next year in particular assuming the market holds. Namely, very quietly, we’re beginning to see a much bigger pick-up of merger activity. M&A (mergers and acquisition) business has been devastated in the past two years with a paucity of deals due to companies being afraid to throw their hoarded capital after other businesses. As the credit freeze has thawed a bit, famed investors like Warren Buffett are doing their largest acquisitions in quite some time (in Buffett’s case, BNI is Berkshire Hathaway’s largest acquisition). As day traders, we are to take away two things from this. On a macro level, it is a bullish thing overall particularly with retail investors largely out of the market as it provides an underlying bid to many sectors. Rather than worrying about whether goods will be transported due to lack of capital, investors now wonder whether NSC or some other railroad could be a takeover target. On a micro level, all the shorts out there who try to jam stocks in say, the railroad sector, down when BNI is in play on the day it happens tend to lose. Furthermore, it causes strange moves in various stocks as people try to guess who is next which can cause some incredible intra-day moves. Be on the lookout for such activity these next fee weeks; at a minimum, be cognizant of the ever-changing environment.

Markets overnight in Asia were down overall with prices declining about 1/3% on average. Prices are higher in Europe, however, in the wake of Wall Street’s gains with the bourses ahead about ½% on average. The carry trade is in full effect this morning with the dollar down almost a full euro, oil up 1%, and gold up almost 1%. This hodgepodge oddly enough is not illuminating Wall Street with the futures down ever so slightly early on and stronger than expected CPI with weaker than expected housing data providing another shove of negative energy. For today, keep a weary eye to the dollar in case the move gets exaggerated, but the econ data seems to be ruling the roost. Look for a fairly quiet and choppy session with no huge moves and a focus on the microcaps

Watch list:
11182009Eriklist.zip

VVUS- positive phase III results of its Avanafil

LDK- sold 15% ownership stake in its 15,000 MT Polysilicon plant in Xinyu City for $219 million

BWS- good earnings

APWR- closed near a high after announcing a deal with a US renewable energy group for wind turbine production

MON, POT, AGU, MOS, TNH, DE, APA, DSX, NAT, FRT- featured on “Mad Money” last night

BKS- closed near a high

TRW- closed near a high

AONE- reversed its downtrend a bit in closing near a high

CIEN- closed near a high

CHS- great earnings

SOLF- good earnings

CSUN- good earnings

Bad-The following stocks have bad news and/or a weak technical pattern

CRM- terrible earnings

DRYS- did an agreement with a bank for $117.5 million for its waiver terms, but also doing a $300 dilutive convertible share offering

CNQR- terrible earnings

ADSK- terrible earnings

TEN- share offering

NLST- closed near a low in reversing the huge positive momentum of the last few days

KFS- Closed near a low after posting terrible earnings

ZOOM- major reversal in closing on a low after posting great earnings

DCP- closed near a trend low

SII- shares crushed yesterday on news of a share offering; 28 million share offering was priced at 26.50 yesterday afternoon

Earnings:

WED NOV 18 BEFORE

BJ CHS SOLF

WED NOV 18 AFTER

CSUN DCI GYMB

LTD NTAP NTES

PETM PVH SMTC

Good luck today.

Epiphany Trading, LLC
www.epiphanytrading.com

Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner